Summary
• The EU has still not announced a decision on anti-dumping duties on some Chinese plywood.
• Higher freight and raw material costs are pushing up producers’ prices.
• The anticipated reduction in China’s export tax incentives has not occurred yet.
• UK hardwood plywood imports rose by 4.9% during January-September.
• OSB prices have held firm over recent weeks.

The UK plywood market is groaning under the weight of uncertainty surrounding customer demand and the possibility that the EU will impose 66.7% anti-dumping duties on tropical red-faced poplar plywood and tropical hardwood-throughout red-faced plywood coming from China.

While higher freight and raw material costs are driving up producer prices, plywood from a variety of origins is trading more cheaply in the UK as sellers look to induce cash flow and to reduce stocks ahead of the Christmas period. “It’s the big-volume business that’s suffering the most,” said a leading importer. “People are buying more hand to mouth.”

An EU decision on anti-dumping measures had been anticipated before now but, according to a Chinese plywood expert, the investigation procedure is running at least four months behind schedule and is continuing to bring serious disruption to the market. The original timetable called for EU officials to issue a disclosure letter detailing their initial thoughts by July 29 this year, with recipients then given a deadline of August 29 to respond prior to a definitive decision on anti-dumping duties being reached by October 29. But as the end of November approached, the disclosure letter had yet to be sent out, he said.

High stocks of Chinese ply

The two types of plywood currently under EU scrutiny are thought to account for more than two-thirds of China’s ply exports to the UK. Many buyers in this country looked to beat the effects of any anti-dumping measures by ordering higher than normal volumes earlier in the year. But with UK importers now reporting some fall-off in demand, the end result is high stocks of Chinese plywood in the UK and a marked reluctance to place fresh business. The spokesperson for a company responsible for bringing substantial volumes of Chinese plywood into the UK market described the delay in EU procedures as “disgraceful” given the “serious effect” on the business community. This was further evidence, he added, that officials in Brussels were “not business-minded”.

It is worth noting that the EU investigation must end by February 28 next year. Thus, it is inferred, no anti-dumping duties will be imposed if the EU has not completed the process by then. As if to underline that nothing can be taken for granted with regard to the Chinese market, the anticipated reduction in the country’s export tax incentives from 5% to zero did not take place.

Many experts are predicting that higher costs and a more difficult supply of poplar will hamper China’s export performance in 2008. Indeed, some believe it will be a decisive year for the industry as an increasing number of international consumers gravitate towards higher-quality supplies. A prominent industry figure said this week: “2008 will sort the wheat out from the chaff in China. Only the quality Chinese producers will prosper.”

For the moment, however, latest UK import statistics continue to underline the domination of Chinese ply throughout most of this year. Figures from independent analyst timbertrends confirm that the country shipped 259,000m3 of plywood to the UK in January-September 2007 compared to 217,000m3 in the corresponding period last year – an increase of around 20%. However, UK imports of Malaysian plywood increased by an even more sizeable 23.6% over the same comparative periods – from 124,300m3 in the first nine months of 2006 to 153,500m3 this time round.

According to timbertrends’ statistics, UK ply imports from Brazil and Indonesia followed an opposite course: hardwood plywood exports from the former dipped 11.5% from 102,900m3 in January-September 2006 to 91,100m3 in the same period this year; while UK imports from Indonesia continued their long-established decline in falling 47% from 29,000m3 to 15,300m3 over the comparative periods. Against this backdrop, one expert described as “bizarre” the decision to hand Malaysia a 3.5 percentage point advantage over Indonesia in terms of GSP duty status.

Combining the stats for all countries, UK hardwood plywood imports climbed 4.9% in the first nine months of 2007 – equivalent in volume terms to some 30,000m3. According to a number of sectoral experts, this increase emphasises the continuing strength of the domestic construction and housing markets.

UK stocks of Malaysian plywood are by no means as plentiful as Chinese material but availability is certainly adequate to cope with current demand. Some cheaper prices have been reported – notably for lower-quality supplies – as well as a fair amount of inter-importer trading. Prices for higher-quality material are said to be firmer, with mills looking for increases “which barely cover the extra costs of freight, logs and glue”. Further increases should be anticipated, TTJ was told, since heavy rains are already impacting on logging activities in Malaysia, leading to evidence of “stretched lead times” in some areas.

Many UK experts – but not all – point to ever-increasing interest in plywood carrying MTCC certification, and to a willingness among “more discerning” importers and merchants to “pay a reasonable price”.

Buying prices in the UK for Brazilian hardwood plywood have fallen back several percentage points in the fourth quarter and are now some way below replacement costs – a “crazy” situation, said one expert, given the substantial increases in timber, glue and transport costs. Meanwhile, elliottii pine plywood prices in the UK were described as “sideways to gently firming”. One contact argued that the product seemed under-bought and that shortages could emerge in certain specifications by late first quarter/early second quarter 2008.

UK demand for birch plywood of northern European origin appears to have lost some of its momentum in recent months. Orders for Latvian material, for example, are understood to have receded slightly – partly in response to a build-up of stocks at a time of year when many UK consumers prefer to keep their inventories to a minimum. This situation has coincided with a reduced availability of shipping capacity out of the Baltics and Russia.

Latvian plywood prices have remained generally firm, not least because of continuing healthy demand in the domestic markets. “We won’t be dropping prices in the first quarter,” a UK-based Latvian plywood specialist told TTJ.

Finnish mill representatives also reported a slight cooling-off in UK demand but insisted that their birch and spruce plywood prices are “not weakening by any means”. According to one producer contact, anyone placing an order now for spruce plywood should not expect to have the material delivered prior to February. And for birch plywood, the time-frame is late first/early second quarter.

UK demand for Russian birch plywood is undiminished, although high prices are said to be deterring customers from carrying large stocks. Prices have continued to firm over recent months and lead times have remained at between six to eight weeks for most items. “Buoyant” domestic demand has enabled sellers in Russia to maintain a bullish stance.

With supplies in the UK already described as “thin on the ground”, one contact warned of significant shortages if another mild winter affects logging operations in Russia.